Homework Question on International Opportunities and Cooperative Strategy
- Determine why, given the advantages of international diversification, some firms choose not to expand internationally. Provide specific examples to support your response.
- As firms attempt to internationalize, they may be tempted to locate their facilities where business regulation laws are lax. Discuss the advantages and potential risks of such an approach, using specific examples to support your response. Cooperative Strategy
- From an ethical perspective, determine how much information a firm is obliged to tell a potential strategic alliance partner about what it expects to learn from the cooperative arrangement. Explain your rationale. Use the Internet to research two U.S.-based companies you believe would mutually benefit from working together in some way.
- Determine which type of cooperative strategy would most benefit the two companies you researched. Provide specific examples to support your response.
Homework Answer on International Opportunities and Cooperative Strategy
A firm can choose not to expand abroad if the domestic market is showing more impressive signs of growth. Expanding to new international markets would of little value if a firm has not fully exhausted domestic opportunities in which it is fully familiar with. For example, a cosmetic company may have a potentially large market for its products overseas. Due to the growing domestic market, it would be more reasonable for the firm to concentrate in meeting its domestic demand, considering that expanding overseas to meet a similar demand would only add costs without delivering any new value.
Secondly, a firm can choose not to expand abroad if it does not know where to start. The reason for this is that rules for overseas operations are always changing. For example, companies that expand abroad normally operate under different rules than the domestic ones that are operating in the same industry. Thirdly, even though international expansion would offer more opportunities, lack of adequate capacity to meet both domestic and overseas market demands may compel a firm stick to domestic market to retain its existing clients.
Firms find it easier to locate their facilities in countries where business regulation laws are lax. For example, since a company will not have to comply with all business regulation laws, it would quickly start its operations to take advantage of available opportunities. Secondly, the company will save costs associated with product and services quality assurance. For example, a company manufacturing sensitive consumer products may evade the costs associated with purchasing and installing expensive quality assurance technologies.